Terra: How LUNA buyers can leverage this strategy to optimize their profits
Disclaimer: The following analysis is the sole opinion of the writer and should not be considered investment advice.
Terra's transformation efforts by the team and its community over the past month have sparked positive investor sentiment, especially earlier this month.
These improvements have helped its native LUNA token grow by more than 250% with a peak of $7.5. Since then, however, a correction has taken place as LUNA dropped below the confines of its four-hour 20/50/200 EMA.
The recent bearish price action changed its previous support to immediate resistance. The coin may suffer a sustained decline in the short term before recovering in the coming sessions.
At press time, LUNA is trading at $2.46, down 4.2% over the past 24 hours.
LUNA 4 hour MOON chart
From the all-time low on August 29, LUNA has turned the tide for exponential gains in the coming days. This retracement momentum set the stage for a triple-digit rally towards the $6.50 resistance.
After testing this resistance a few times, the bears were quick to sabotage the overwhelming rally. The altcoin saw a sharp drop, creating a bearish crossover of the 20/50 EMA with the 200 EMA (green).
Meanwhile, LUNA marks a descending triangle breakout in this time frame. A drop below the $2.4-$2.5 range has reaffirmed the selling advantage. A reversal of the $2.40 resistance will position LUNA to test the $2.11-2.17 range before a reversal is possible.
On the downside, a final or immediate bounce above the 20/50 EMA will confirm bearish invalidation.
Increased selling pressure has kept the Relative Strength Index (RSI) in the bearish territory. A rally towards the 40-50 range could create a rather slow period of compression on the chart.
In addition, the DMI lines show a strong downtrend. ADX shows a fundamentally weak directional bias for LUNA.
Alternatively, to gauge the altcoin's chances of a recovery, traders can look for a revival in Chaikin Money Flow (CMF) above the -0.1 level.
With a descending triangle setup along with a death cross at the EMAs, LUNA has little chance of recovering. Any improvement in investor sentiment leading to a close above the 20/50 EMA could confirm the bearish bias. In any case, the goals will remain the same as discussed.
Finally, investors/traders should keep a close eye on Bitcoin's movements. This can affect the overall sentiment of the market.
Sep 25, 2022